NIBA Journal

Insights, analysis, and updates from the National Introducing Brokers Association

March 23, 2012

Summary of Last Ten Year Trends in FCM/Listed Derivatives Industry

Overview of the Last Ten Years of Segregated Funds Data for US FCM’s: Source: CFTC, in Billion USD. 10 Year Evolution of Segregated Funds: As illustrated above, 2011 & 2009 are the only two years in the last 10 that the US segregated funds decreased, as published by the CFTC. The percentage decrease in 2011 was 4% and in 2009 the decrease was 15%. The total segregated funds at the end of December 2008, 2009, 2010 & 2011 were 158, 134, 151 & 145 billion respectively. Over the ten year period from 2002-2011 the customer segregated funds for US markets grew at a compounded annual growth rate (CAGR) of 12%. If one were to only look at the December 31st figures it could be accurately assumed that the industry has not yet recovered from the financial crisis of 2008 in terms of segregated funds. However, in February and July 2011,...

MF Global Customers Face Tax Reporting Issues

Commodity customers of failed futures broker MF Global, Inc., face several tax issues relating to the broker's liquidation.  First, the customers must determine what tax items relating to their MF Global accounts to include in the preparation of their 2011 tax returns.  Second, the customers may need to decide when and whether they can deduct a loss for any amounts not recovered. Normally, commodity customers of an FCM receive from the FCM Forms 1099-B (which generally report trading gains and losses) and 1099-INT (which report interest income) that indicate what items the customers should include in their tax reporting.  The SIPC trustee administering MF Global's liquidation currently indicates on the trustee's website that he has requested an extension of the deadline for filing and mailing Forms 1099 to mid-March.  Notably, the trustee faces challenges in preparing the Forms 1099-B.  For customers that traded on foreign exchanges, the trustee must calculate...

Senate Letter to IRS - Tax Guidance for MF Global Customers

The Honorable Douglas H. Shulman Commissioner of Internal Revenue Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 February 27, 2012 Dear Commissioner Shulman We are writing on behalf of the former customers of MF Global, Inc, On October 3 1,20 II , the firm filed for bankruptcy after revealing that hundreds of millions of dollars in customer money had gone missing, With tax deadlines fa st approaching, and with so much uncertainty still remaining over the fate of that money, we ask your agency to issue immediate guidance to MF Global's customers and to be flexibl e with those customers who may need to file their taxes with incomplete information. Former MF Global customers are still waiting for 1099 forms detailing gains and losses to their accounts in 20 I I . The court-appointed trustee applied for and received two ex tensions from your agency, but the former...

Straits Financial Hires Carol Dannenhauer and Forms LW Managed Accounts Division

Straits Financial LLC, a member and brokerage arm of the CWT Group, today announced it has hired Ms. Carol Dannenhauer as Executive Vice President and Head of its newly formed LW Managed Accounts Division. Straits is a registered FCM and a clearing member firm with the CME, CBOT, NYMEX and COMEX. “Carol joining Straits is a dream come true” said Joseph Mazurek, President of Straits Financial LLC. “Carol knows managed futures and she is a trusted name in the industry having served under the Lind-Waldock banner most of her career. She and Straits share much in common so this is a natural partnership focusing on providing quality customer service. Straits does not proprietary trade; our focus is 100% on clients and the protection of their assets.” This expands our product offering and notwithstanding where your Lind-Waldock account was transferred to, you the customer can Come Home Again” adds Paul Fry,...

CFTC Held Open Meeting to Consider One Final Rule and One Proposed Rule

Washington, DC – The Commodity Futures Trading Commission (CFTC) held a public meeting on Thursday, February 23, 2012, at 9:30 a.m. For more details and a link to watch a live webcast of the meeting, please visit: http://www.cftc.gov/PressRoom/PressReleases/pr6184-12

NFA Annual Meeting Review

Dear Members: I attended the NFA Annual Meeting today. As usual, there were more NFA employees than NFA members attending. The meeting lasted about 30-minutes and was very focused on issues surrounding the MF Global failure and crisis. Dan Roth, NFA President listed NFA actions by breaking them into three categories: 1. Things that the NFA might be able to do differently in co-operation with other SROs. 2. Things that the NFA can do differently by changing their own rules. 3. Things that are outside the authority of the NFA, but might be done differently if the industry makes the need for change clear. Several things that are being discussed with the committee of SROs sound like good ideas, and might not be so difficult to accomplish: (i) requiring seg investment detail reports to be filed more often and perhaps even displayed on NFA's website; (ii) performing more frequent spot...

NIBA Summer Meeting - Kansas City Board of Trade

The NIBA Summer Meeting is scheduled for the afternoon of June 21, 2012 at the Kansas City Board of Trade. In addition to a legal update, this meeting will focus primarily on agriculture issues important to our members. Details to follow soon.

CFTC Presents a Feature Session at the NIBA Conference

NIBA will hold its Spring Membership Conference April 18, 2012 in New York City at the NYMEX Building, 1 No. End Avenue. Registration and Coffee begin at 12:30pm; sessions begin at 1:15pm. Our featured speaker, the Honorable Jill Sommers, is the Senior CFTC Commissioner with regard to the MF Gobal matter. She will be discussing CFTC responses and proposals aimed at preventing another calamity such as resulted from MFG's failure and bankruptcy from ever happening again. In addition to the CFTC Session, the meeting also includes: NIBA's Semi-Annual Legal Review How to Assess the Risks of Doing Business with your FCM Forex: Exchange-Traded or Cash? The Market Update from Telvent DTN A joint NIBA/CTA Expo Networking/Cocktail Reception immediately follows the business sessions at the exchange building. NIBA members are invited to attend the April 18 meeting Free. Please register now. Space at the exchange building is quite limited and this...

Introducing Broker--Net Capital Calculations

During a recent routine NFA audit of one of our Introducing Broker (IB) clients, it became apparent that NFA is enforcing the following: Security Deposits with your FCM are treated as 50% current and 50% noncurrent for capital purposes. Escrow Accounts (or other trading accounts) at your FCM are considered current for capital purposes but has a 50% haircut during the Net Capital Computation. If the Escrow account is being traded by your firm at a level equivalent to the dollars in the account, then the account is considered a firm trading account and the account balance is considered current without the 50% haircut. However, if there are uncovered open positions in the account, the standard haircut against net capital applies on those open positions. An Error account with your FCM may also be reviewed in the same manner as an Escrow account. Therefore, we recommend reviewing your accounts held...

Top 10 Google AdWords Mistakes Brokers Make When Generating Futures Leads

Google AdWords is the most effective, budget-friendly, and powerful way to generate futures leads. Ads can be displayed not only on Google but on websites of all sizes from CNBC and Bloomberg to individual bloggers. Add the ability to view informative reports and set your own-budget (and stop-and-start on the fly) and you see why AdWords is the advertising method of choice. However, in the ongoing quest for futures leads, many of the brokers we speak with have tried Google AdWords or other Search Engine Marketing tools but have been disappointed with the results. Common complaints are that they spent a lot of money, didn’t generate many leads, and it was harder than they thought to set up. In our experience of executing and managing Search Engine Marketing campaigns for futures brokers, here’s what we’ve identified as the top 10 AdWords mistakes: AdWords Mistake #1: Buying Too Many Keywords When...

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